5 Reasons To Consider Real Estate As Part of Retirement Portfolio

One of the biggest concerns for every individual from their mid 30’s is planning for retirement. After one’s retirement, arranging for regular income involves some groundwork on the market trends to safeguard your investments and scale up your returns.

The golden years of retirement demand a safe income generation and real estate investments best work to protect your retirement interests and aspirations. Real estate offers myriad options to invest, and the tax regimes like GST have always encouraged new entrants into the market. It is one of the safest ways to build your income if your moves are strategic enough. 

If you plan for a secure retirement through investment, then the real estate has its best to offer you, as it can generate steady passive income retaining the property. 

Real Estate Investment as Retirement Plan

• A Safer Haven for Investors

Real estate investment is safe when you go for more extended periods of investment. You might see a few downward trends during your investment journey due to the market dynamics. But the investments scale up to even higher values, once the recovery stage kicks in.  

Also, compared to the volatile market instruments like Stocks that may sweep your earnings overnight, Real estate investments prove to be less risky. While the market falls, real estate investment is backed by a physical asset that appreciates with time protecting your interests. 

Hence, real estate investment can be an excellent plan for retirement to protect the entire savings of your lifetime. It ensures a favourable outcome for long term investment.

• Opportunity to Mitigate the Risk

Real estate provides you with umpteen options for investing. If you have a diverse investment portfolio, you are resilient to market fluctuations. Investing in multiple properties is a good idea if you plan for retirement as it reduces the risks. This ensures a smooth cash flow at all times. It also reduces the intensity of the losses by counterbalancing the underperformed asset with a high-performing asset’s returns. This makes it a more retirement oriented investment. 

• Protection Against Inflation

Inflation is an economic phenomenon during which the living costs increase drastically. It could be a challenging phase from the retirement perspective. But there are investments that work well and shield you from downfalls like inflation and recession.

If you own a property and rent it out, inflation drives higher income. Because the increase in living costs escalates your earnings through rental returns, this, in turn, balances your expenditure hedging against the inflation.

• Highly Elastic Industry – Levels the Setbacks and Rises Higher

Any fall in the real estate prices is interim. All you must do is wait for the right time to come. The real estate gets back to the original order; in fact, higher-order in a short period after the setbacks. This certifies it as an option for retirement investment as any losses are only intermittent.

• Capital Appreciation fetches you Higher Returns

The property’s worth increases over time due to capital appreciation. This, in turn, attracts lucrative returns that help you keep up with the expenditure, growing with time. If you wish to sell your property to meet any unforeseen retirement life requirements, you would be entitled to higher margins of profit.

• Tax Rebates are Add-Ons to the Returns

Real estate buyers can avail the tax benefits during the purchase of a property through loans by claiming a tax rebate. If you buy a property through a home loan, you can claim the tax rebate on the principal amount up to Rs.1 Lakh per annum, and interest paid can be claimed up to Rs.2 Lakhs annum.

If you hold a joint property, both the investors can claim a tax rebate up to Rs.2 Lakhs interest. This helps in acquiring a more significant property that brings in proportionate returns. The higher returns ensure a safer retirement life and also help you get along with the increasing expenditures. 

Investment Options for Retirement Planning

The following are some of the investment options that work best for retirement.

• Buy and Hold Properties

Also called rental properties, buy and hold properties generate regular income and reduce the potential risks. Let us see how they work best for the retirement portfolio.

The property value appreciates with time, and you can earn a steady income retaining the property. The escalating worth of property drives a higher rental income, which compensates for the increasing living costs. Besides, post-retirement costs are always a hazy picture. So, your investment must see that your demands are met, and rental properties are the ones you can trust. 

Buy and hold properties are a good option as they need less skill and are static concerning the process. You have the least to worry about the trends, as residential properties are a utility resource that can never go off-trend. Therefore, you can start with this type of investment at any time for retirement. 

As a word of caution, you should be aware of the maintenance or repair costs that you should bore. While it could be a little hectic for old aged, hiring a property manager shall help you handle the works like collecting the rents and getting the repairs done. Investing through online platforms like Assetmonk can make it hassle-free, as they offer you pre and post-purchase asset management facilities. 

• Commercial Properties

Commercial properties are used exclusively for business-related purposes, and you require a large amount of capital to invest in these kinds of properties. They also have higher returns as they have attractive leasing rates. The tenure for the rental is too high, which reduces the potential losses. 

If you plan for retirement investment, then commercial properties seem to be a viable option when you invest at your young age. They generate a steady passive income for longer durations through lease agreements. 

If you are trying your hands on real estate in your career’s late stages, commercial properties are not smooth to handle. Any fall in the market trends affects your investment adversely. Also, doing away with the mortgage and leverages by retirement can make it a risk-free earning process. Hence, investing early in commercial properties is advisable.  

• REIT

Real Estate Investment Trusts are one of the safe options to invest in. REIT is a company that buys property from the shares of investors. REITs pay you the earnings in the form of dividends when you buy their shares. 

It ensures your profit as the company invests in diverse investments. You earn as both dividends and through investment value appreciation. REITs prove to be beneficial for retirement because it involves minimal risks. It also ensures stable and regular cash flow which is the criterion for retirement investment.

Real estate can be a great saviour from the dwindling opportunities for and post-retirement that the present-day market offers. The changing trends of the markets are bringing novel investment approaches like fractional ownership and crowdfunding. This proves the industry’s potential to adapt and go further making real estate a wise choice for retirement investment. 

What are you waiting for? Fasten your belts and gear up to build your portfolio today for a happy retirement! If you are a beginner or one looking for expanding your portfolio, Assetmonk is a platform in the field of real estate that helps you bag the best deals on your investment. We offer our services throughout the process of purchasing—the diverse properties listed on the platform range from residential to co-living and condos. For more details, click here!